Every 3PL likes to talk about how they can be fast, accurate, and inexpensive when it comes to managing inventory and fulfilling orders. But what does this actually mean and how does it benefit your business? What if a 3PL does things quickly at the expense of accuracy or has a very high accuracy rate at the expense of time? It’s important to understand the total value proposition a 3PL offers and to determine whether that value proposition aligns with where you want to take your business.
This article explores the benefits of working with a 3PL and how they can impact your business.
Many businesses struggle with inventory management, which can mean many things:
- SKU management: Smartly adding and removing SKUs from inventory
- Channel management: Adequate inventory available for all sales channels
- Accurately and consistently forecasting order volume and inventory needs
Businesses, their suppliers, and their 3PL all play an important role in the supply chain. If a business doesn’t do a good job forecasting, orders to suppliers won’t be aligned with demand. If suppliers aren’t timely and accurate with their production and inventory shipments, your 3PL may not have adequate product to fulfill all your orders. And, if your 3PL isn’t able to fulfill your orders and provide accurate inventory counts, you and your customers will suffer the consequences.
At a minimum, your 3PL should be able to provide you ready access to inventory information through reporting and analytics so that you can make informed decisions. They should also have:
- Expertise to discuss different inventory management strategies with you
- Knowledge on how to effectively work with your suppliers
- Ability to provide inventory aging data to identify slow or non-moving inventory
- Bandwidth to participate in your inventory growth planning discussions
- A plan to accommodate your expected growth
An argument can be made that efficiency is the core service a 3PL provides its customers. If a 3PL isn’t efficient, its clients will suffer and ultimately, it will fail. The ability to be efficient comes from several areas:
The speed, automation, simplicity, organization, and insight technology provides is a critical element to efficient operations. Modern, successful 3PLs have a significant investment in technology, ranging from software and reporting systems to sophisticated equipment and even robots. All of this technology is focused on making the operation more efficient and generating benefits for clients and their customers.
2. Expert Staff
Good 3PLs don’t create themselves; they require a savvy team of professionals. As a 3PL client, most of your interaction will be with the operations team, as they oversee daily warehouse and order fulfillment operations. This relationship is critical, and you should feel that you have a primary point of contact that you work with regularly. You should also be able to communicate with other team members as appropriate – whether to discuss changes to your business, your frustrations, new opportunities, or simply to touch base and keep the relationship strong. With an expert staff in place, clients will benefit from their experience and know-how, which they can then apply to solving problems and capturing new opportunities with you.
3. Focus on Processes
Consistency is key to a successful 3PL partnership, and it’s driven by repeatable and measurable processes. In order for a 3PL to provide its clients with the best-possible experience, it needs to have an eye focused on its processes to maximize their benefit. You may find that some processes are macro-level and apply to all clients, while others may be developed to meet client-specific requirements. In simple terms, a 3PL should have processes to handle complexity in their business so you have simplicity in yours.
4. Continual Improvement
Henry Ford said it well: “Most people spend more time and energy going around problems than trying to solve them.” If a 3PL is not seeking out problems and working hard to solve them, they are not improving on behalf of their clients. There are always opportunities to get better and finding a 3PL partner that embraces this philosophy and will talk openly with you about this work is an important step in growing your business.
A 3PL should provide you significant cost savings. These savings typically fall into two categories:
- Buying power and negotiating leverage
- Spreading labor, facility, and equipment costs across all clients
Buying power benefits companies when it comes to supply costs such as boxes, tape, paper, ink, and other supplies necessary for order fulfillment. Bigger savings come from the ability to negotiate lower freight rates for their clients because they negotiate based on their entire shipment volume from all clients, as opposed to any of the individual clients negotiating their own rates. All companies benefit from lower freight rates, and for larger companies, these savings can equate to millions of dollars. For a more comprehensive look at how 3PLs can save you money, check out our other articles.
Having a good 3PL partner will benefit your business in many ways. Some of these benefits are financially significant while others allow your team to focus on creating great products, providing world-class service, increasing sales, and furthering your success.